Agrium Reports Second Highest Quarter Results on Record
(firmenpresse) - CALGARY, ALBERTA -- (Marketwired) -- 08/07/13 -- ALL AMOUNTS ARE STATED IN U.S.$
Agrium Inc. (TSX: AGU) (NYSE: AGU) announced today consolidated net earnings ("net earnings") of $747-million ($5.02 diluted earnings per share) for the second quarter of 2013, compared with net earnings of $860-million in the second quarter of 2012 ($5.44 diluted earnings per share).
The 2013 second quarter results included a pre-tax share-based payments recovery of $30-million ($0.15 diluted earnings per share), pre-tax proxy defense costs of $12-million ($0.06 diluted earnings per share), and a pre-tax loss of $3-million on natural gas and other hedge positions ($0.01 diluted earnings per share). Excluding these items, net earnings would have been $736-million ($4.94 diluted earnings per share).(1)
"Agrium delivered our second highest gross profit of $1.7-billion and quarterly Adjusted EBITDA(2 ) of $1.2-billion due to the strength of our leading position across the crop input value chain. The cold, wet weather experienced in North America this spring resulted in a compressed spring application season and Agrium rose to this challenge by delivering crop input products and services to our customers in a highly efficient manner. This highlights the strength of our production and distribution assets and our ability to deliver significant value to our customers," said Mike Wilson, Agrium President and CEO.
"We expect solid demand for crop inputs in the second half of 2013 given positive grower sentiment, strong nutrient removal this year and the affordability of crop nutrients," added Mr. Wilson.
As of July 31, 2013, we have purchased approximately 2 million shares at an average price of approximately $88 per share for total consideration of approximately $179-million under our normal course issuer bid ("NCIB"). Under the NCIB entered into on May 14, 2013, we may purchase for cancellation up to approximately 7.5 million of our currently issued and outstanding common shares until May 20, 2014. The actual number of shares purchased will be at Agrium's discretion and will depend on market conditions, share prices, Agrium's cash position and other factors.
MANAGEMENT'S DISCUSSION AND ANALYSIS
August 7, 2013
Unless otherwise noted, all financial information in this Management's Discussion and Analysis ("MD&A") is prepared using accounting policies in accordance with International Financial Reporting Standards ("IFRS") and is presented in accordance with International Accounting Standard 34 - Interim Financial Reporting. All comparisons of results for the second quarter of 2013 (three months ended June 30, 2013) are against results for the second quarter of 2012 (three months ended June 30, 2012). All dollar amounts refer to United States ("U.S.") dollars except where otherwise stated. Certain financial measures in this MD&A are not prescribed by IFRS, and are defined in the Additional and Non-IFRS Financial Measures section of this MD&A.
The following interim MD&A is as of August 7, 2013 and should be read in conjunction with the consolidated interim financial statements for the three and six months ended June 30, 2013 and 2012 (the "Consolidated Financial Statements"), and the annual MD&A included in our 2012 Annual Report to Shareholders to which readers are referred. The Board of Directors carries out its responsibility for review of this disclosure principally through its Audit Committee, comprised exclusively of independent directors. The Audit Committee reviews, and prior to publication, approves, pursuant to the authority delegated to it by the Board of Directors this disclosure. No update is provided where an item is not material or there has been no material change from the discussion in our annual MD&A. Forward-Looking Statements are outlined after the Outlook, Key Risks and Uncertainties section of this MD&A.
2013 Second Quarter Operating Results
CONSOLIDATED NET EARNINGS
Effective January 1, 2013, Agrium adopted IFRS 11 Joint Arrangements whereby the classification and accounting of our investment in Profertil S.A. ("Profertil") and other joint arrangements previously accounted for using the proportionate consolidation method are accounted for using the equity method. 2012 figures have been restated and additional information has been provided in the Supplemental Information tables to display the results of our joint ventures. Adjusted EBITDA(1) has been added to show our results before finance costs, income taxes, depreciation and amortization of our joint ventures.
Agrium's 2013 second quarter consolidated net earnings ("net earnings") were $747-million, or $5.02 diluted earnings per share, compared to net earnings of $860-million, or $5.44 diluted earnings per share, for the same quarter of 2012.
Sales
Sales increased by $244-million to $7.0-billion for the second quarter of 2013 and decreased $103-million to $10.2-billion for the first half of 2013 compared to the second quarter and first half of 2012, respectively. Factors that affected our performance during the second quarter of 2013 compared to the second quarter of 2012 include the following:
Gross Profit
Our gross profit for the second quarter of 2013 was $1.7-billion, a decrease of $129-million compared to the second quarter of 2012. The drivers of this variance consist of:
Expenses
Expenses increased $22-million for the second quarter of 2013 compared to the second quarter of 2012. This difference is primarily a result of the following items:
The above increases were partially offset by a $39-million favorable change in share-based payments expense, with a $30-million share-based payments recovery in the second quarter of 2013 compared to a $9-million charge in the second quarter of 2012 (see section "Other" for further discussion).
The following table is a summary of our other expenses (income) for the second quarter and first half of 2013 and 2012, respectively.
Effective Tax Rate
The effective tax rate was 27 percent for the second quarter and first half of 2013 and is comparable to the effective tax rate of 28 percent for the second quarter and first half of 2012.
Retail
Retail reported record second quarter sales of $5.6-billion, an increase of 7 percent compared to sales of $5.2-billion reported in the same period last year. The increase was driven by a return to a more regular seasonal crop input demand for the first half of 2013 in North America and the exceptionally early planting season experienced in 2012. Gross profit was $1.1-billion in the second quarter of 2013, in-line with the same period last year. Retail reported record EBITDA of $619-million for a second quarter, compared to $605-million reported in the same quarter of last year. Retail EBITDA results for the first half of 2013 were down from the previous year, due primarily to the compressed spring season experienced in the U.S. this year compared to the early and open spring season of last year.
Crop nutrient sales were $2.5-billion this quarter, compared to $2.4-billion in the second quarter of 2012. The increase was due to a 9 percent increase in total crop nutrient volumes as a result of acquisitions made in the second half of 2012 and the seasonal shift from the significantly early application season a year ago. North America nutrient sales volumes increased by 6 percent and Australia improved by 27 percent in the second quarter of 2013 when compared to the same period last year. Gross profit for crop nutrients was $424-million this quarter, an increase of $24-million compared to the $400-million reported in the second quarter of 2012. Total crop nutrient margins as a percentage of sales were 17 percent in the second quarter of 2013, which is in-line with the same quarter last year. Retail nutrient margins were $103 per tonne this quarter, slightly lower than the $107 per tonne in the second quarter of 2012, despite a higher proportion of sales volumes in international versus domestic markets this year, as well as lower benchmark nutrient prices year over year and declining prices throughout the first half of 2013.
Crop protection sales were $1.8-billion in the second quarter of 2013, compared to the $1.7-billion in sales reported in the same period last year. The increase in sales was driven by minor price increases, an increase in wholesale crop protection sales, and acquisitions made in the second half of 2012. Gross profit this quarter was $406-million, an increase of $6-million over the $400-million reported in the second quarter of 2012. Total crop protection margins as a percentage of sales were 22 percent this quarter, compared to 23 percent in the same period last year. This slight decline is a result of the significantly earlier spring season last year moving traditionally third quarter higher margin products into the second quarter of 2012, and wholesale products experiencing a higher sales mix in the current quarter of 2013. First half 2013 crop protection margins as a percentage of sales were 20 percent, on par with the same period in 2012.
Seed sales were $809-million in the second quarter of 2013, up from $712-million in the second quarter last year as a result of the delayed spring planting season in the current year and the historical early planting season last year. Gross profit was $140-million this quarter, 12 percent higher than the $125-million reported last year. Seed margins as a percentage of sales were 17 percent in the second quarter of 2013, in-line with the margins reported in the same period for 2012. For the first half of 2013, seed margins were 17 percent, 1 percent higher than reported in the same period for 2012.
Sales of merchandise in the second quarter of 2013 were $142-million, compared to $157-million in the same period last year. Gross profit for this product line was $23-million this quarter, compared to $32-million reported in the second quarter of 2012. This decrease is due to low cattle and sheep prices in Australia during the current quarter which led farmers in this region to be more cautious on discretionary spending on general merchandise and animal related products.
Services and other sales were $279-million this quarter, compared to the $264-million reported in the second quarter of 2012. Gross profit was $149-million in the second quarter of 2013, compared to $147-million for the same period last year.
Retail selling expenses for the second quarter of 2013 were $538-million compared to $520-million in the same period last year. The majority of this variance is related to increased operating costs and the associated depreciation and amortization of retail locations acquired in 2012. Selling expenses as a percentage of sales decreased to 9.7 percent in the second quarter of 2013 compared to 10.0 percent reported in the second quarter last year.
Wholesale
Wholesale's 2013 second quarter sales were $1.5-billion, lower than the $1.6-billion reported in the same quarter last year. Gross profit was $486-million this quarter, compared to $652-million in the second quarter of 2012. Wholesale reported EBITDA of $517-million in the second quarter of 2013, a decrease of $160-million from the same period last year. Wholesale's Adjusted EBITDA, defined as EBITDA before finance costs, income taxes, depreciation, and amortization of our joint ventures (predominantly related to our 50 percent ownership in the Profertil nitrogen facility) was $525-million this quarter, compared to $686-million reported in the same period last year. Wholesale's results this quarter were primarily impacted by lower realized sales prices for urea, potash and phosphate as a consequence of global market pressures accompanied by an unplanned outage at our Redwater nitrogen facility.
Nitrogen gross profit in the second quarter of 2013 was $294-million, compared to $412-million in the same quarter last year. Nitrogen sales volumes were 1,103,000 tonnes in the second quarter of 2013, down 113,000 tonnes from the same period last year as a result of an unplanned outage at our Redwater facility in June which led to lower urea and nitrogen solutions sales volumes. Realized sales prices for ammonia were stronger than the second quarter last year, while urea was impacted by a significant drop in benchmark pricing during the quarter. Nitrogen cost of product sold was $315 per tonne this quarter, an increase from the $235 per tonne reported in the second quarter of 2012 due primarily to higher natural gas costs and expenses associated with the Redwater outage and subsequent advancement of the planned September turnaround at the facility into the month of June. Our average nitrogen gross margins were $267 per tonne this quarter, compared to $339 per tonne in the same period last year.
Agrium's average natural gas cost in cost of product sold was $3.67/MMBtu this quarter ($3.73/MMBtu including the impact of realized losses on natural gas derivatives), compared to $2.09/MMBtu for the same period in 2012 ($2.57/MMBtu including the impact of realized losses on natural gas derivatives). Hedging gains or losses are included in other expenses and not cost of product sold, thus are not part of the calculation of gross profit. The U.S. benchmark (NYMEX) natural gas price for the second quarter of 2013 was $4.09/MMBtu, compared to $2.26/MMBtu in the same quarter last year. The AECO (Alberta) basis differential was a $0.56/MMBtu discount to NYMEX in the second quarter of 2013, comparable to the $0.44/MMBtu discount in the second quarter of 2012.
Potash gross profit for the second quarter of 2013 was $120-million, compared to $153-million reported in the same quarter last year. The decrease was driven by lower realized sales prices in both international and domestic markets. The impact from lower prices was partially offset by an increase in total sales volumes to 544,000 tonnes in the current quarter versus 512,000 tonnes in the same period last year. International sales volumes were 33 percent higher in the second quarter of 2013 than the same period last year following the settlement of new contracts with China and India in early 2013. Domestic sales volumes were 243,000 tonnes this quarter, down from 285,000 tonnes in the second quarter of 2012. Potash cost of product sold was $168 per tonne this quarter, $13 per tonne lower than the $181 per tonne reported in the second quarter of 2012 as a result of a higher percentage of international volumes and lower freight costs on domestic sales as compared to the same quarter last year. Gross margin on a per tonne basis was $221 in the second quarter of 2013, compared to the $299 per tonne realized during the same quarter in 2012.
Phosphate gross profit was $27-million in the second quarter of 2013, compared to $42-million in the same quarter last year. The decrease was primarily due to lower realized sales prices resulting from weaker global market conditions, particularly in relation to demand from India. Realized phosphate sales prices were $667 per tonne this quarter, a decrease from $713 per tonne in the same period last year. Phosphate cost of product sold was $584 per tonne in the second quarter of 2013, a slight increase from $581 per tonne in the same period last year. Phosphate sales volumes were 317,000 tonnes in the second quarter of 2013, slightly higher than 313,000 tonnes in the second quarter last year. On a per tonne basis, gross margin in the second quarter of 2013 decreased to $83 per tonne, compared to $132 per tonne in the same period last year.
Product purchased for resale gross profit was $8-million this quarter, compared to $15-million in the second quarter of 2012. The decrease was primarily a result of lower international sales volumes and lower margins on domestic nitrogen products. Gross profit on ammonium sulfate and other was $7-million higher than the same period last year, as unfavourable weather conditions in the first quarter of 2013 pushed sales into the second quarter and input costs for sulfur declined compared to the same period last year.
Wholesale expenses in the second quarter of 2013 were $33-million, compared to $24-million in the second quarter of 2012. The increase in expenses was driven primarily by an increase in environmental remediation costs and asset decommissioning at the Kapuskasing mine.
Advanced Technologies
AAT reported a record quarterly gross profit of $39-million in the second quarter of 2013, an increase of $3-million over the $36-million reported in the same period last year. EBITDA was also a record $24-million in the second quarter, a 20 percent increase over the $20-million reported in the same period last year. The year-over-year improvement was primarily due to increased ESN volumes as a result of gains in market acceptance in North America for this product and incremental production at our New Madrid facility which was completed in the second half of 2012.
Other
EBITDA for our Other non-operating business unit for the second quarter of 2013 was $39-million, compared to $24-million for the second quarter of 2012. The favorable increase was primarily driven by a $39-million favorable change in share-based payments expense, where there was a $30-million recovery in the second quarter of 2013 compared to a $9-million charge in the second quarter of 2012. This was largely caused by a depreciation of our share price during the second quarter of 2013 compared to an appreciation of our share price during the second quarter of 2012.
The increased EBITDA was partially offset by the 2012 one-time recovery on the settlement of the sale of the commodity management business which was not repeated in 2013 coupled with non-recurring proxy defense costs in the second quarter of 2013 compared to the second quarter of 2012.
FINANCIAL CONDITION
The following are changes to working capital on our Consolidated Balance Sheets in the six-month period ended June 30, 2013 compared to December 31, 2012.
LIQUIDITY AND CAPITAL RESOURCES
Summary of Consolidated Statements of Cash Flows
Below is a summary of our cash provided by or used in operating, investing, and financing activities as reflected in the Consolidated Statements of Cash Flows:
The sources and uses of cash for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 are summarized below:
Our investing capital expenditures increased in the first half of 2013 compared to the first half of 2012 due to continued activity on the Vanscoy potash expansion project.
Short-term Debt
Our short-term debt at June 30, 2013 is summarized as follows:
OUTSTANDING SHARE DATA
The number of Agrium's outstanding shares at July 31, 2013 was approximately 147 million. At July 31, 2013, the number of shares issuable pursuant to stock options outstanding (issuable assuming full conversion, where each option granted can be exercised for one common share) was approximately nil.
The agricultural products business is seasonal in nature. Consequently, comparisons made on a year-over-year basis are more appropriate than quarter-over-quarter. Crop input sales are primarily concentrated in the spring and fall crop input application seasons, which are in the second quarter and fourth quarter. Crop nutrient inventories are normally accumulated leading up to each application season. Our cash collections generally occur after the application season is complete.
BUSINESS ACQUISITION
As described in our annual MD&A included in our 2012 Annual Report, we have agreed to purchase certain agri-products assets of Viterra from Glencore which acquired Viterra on December 17, 2012. On April 30, 2013, CF, holder of a 66 percent interest in the Medicine Hat facility, acquired Viterra's 34 percent interest from Glencore (the "CF transaction"). Following closing of the CF transaction, we received Cdn$939-million (U.S.$932-million), which is subject to adjustment for final determinations of amounts in accordance with our agreement with Glencore. Refer to note 4 of the Summarized Notes to the Consolidated Financial Statements for further information.
NORMAL COURSE ISSUER BID
On May 14, 2013, the Toronto Stock Exchange ("TSX") accepted Agrium's notice of intention to make a normal course issuer bid ("NCIB") whereby Agrium may purchase up to 7,472,587 common shares on the TSX and New York Stock Exchange during the period from May 21, 2013 to May 20, 2014 with a daily purchase limit of 133,301 common shares on the TSX. During the three months ended June 30, 2013, we purchased approximately one million shares for total consideration of approximately $88-million under our NCIB. From July 1, 2013 to July 31, 2013, we purchased approximately one million shares for total consideration of approximately $91-million. Refer to note 10 of the Summarized Notes to the Consolidated Financial Statements for further information.
ADDITIONAL AND NON-IFRS FINANCIAL MEASURES
In the discussion of our performance for the quarter, in addition to the primary measures of earnings and earnings per share reported in accordance with IFRS, we make reference to EBIT, EBITDA and Adjusted EBITDA. We consider EBIT, EBITDA and Adjusted EBITDA to be useful measures of performance because income tax jurisdictions and business segments are not synonymous and we believe that allocation of income tax charges distorts the comparability of historical performance for the different business segments. Similarly, financing and related interest charges cannot be allocated to all business units on a basis that is meaningful for comparison with other companies.
EBITDA and Adjusted EBITDA are not recognized measures under IFRS, and our method of calculation may not be comparable to other companies. In addition, these measures should not be used as alternatives to net earnings as determined in accordance with IFRS.
EBIT is presented on our Consolidated Statements of Operations and is classified as an additional IFRS measure.
The following table is a reconciliation of EBIT, EBITDA and Adjusted EBITDA to net earnings as determined in accordance with IFRS:
Supplemental Information 5, Selected Financial Measures, also provides certain ratios that are not recognized measures under IFRS and our method of calculation may not be comparable to that of other companies. Ratio definitions are provided in Supplemental Information 6, Accompanying Notes to Supplemental Information. Return on operating capital employed, return on capital employed, and average non-cash working capital to sales presented in Supplemental Information 5 are measures classified as additional IFRS financial measures, where they reflect Consolidated Agrium. We consider these measures to provide useful information to both management and investors in measuring our financial performance and financial condition.
CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES
We prepare our financial statements in accordance with IFRS, which requires us to make assumptions and estimates about future events and apply significant judgments. We base our assumptions, estimates and judgments on our historical experience, current trends and all available information that we believe is relevant at the time we prepare the financial statements. However, future events and their effects cannot be determined with certainty. Accordingly, as confirming events occur, actual results could ultimately differ from our assumptions and estimates. Such differences could be material. For further information on the Company's critical accounting judgments and estimates, refer to the section "Critical Accounting Judgments and Estimates" of our 2012 annual Management's Discussion and Analysis, which is contained in our 2012 Annual Report. Since the date of our 2012 annual Management's Discussion and Analysis, there have not been any significant changes to our critical accounting judgments and estimates.
CHANGES IN ACCOUNTING POLICIES
Effective January 1, 2013 Agrium adopted IFRS 11 Joint Arrangements whereby the classification and accounting of our investment in Profertil and other joint arrangements previously accounted for using the proportionate consolidation method are accounted for using the equity method. Refer to note 3 of the Summarized Notes to the Consolidated Financial Statements for further information.
For information regarding changes in accounting policies, refer to the section "Accounting Standards and Policy Changes Not Yet Implemented" of our 2012 annual Management's Discussion and Analysis, which is contained in our 2012 Annual Report.
BUSINESS RISKS
The information presented on Enterprise Risk Management and Key Business Risks on pages 74 - 77 in our 2012 Annual Report has not changed materially since December 31, 2012.
CONTROLS AND PROCEDURES
There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PUBLIC SECURITIES FILINGS
Additional information about our company, including our 2012 Annual Information Form is filed with the Canadian securities regulatory authorities through SEDAR at and with the U.S. securities regulatory authorities through EDGAR at .
OUTLOOK, KEY RISKS AND UNCERTAINTIES
Weather was an important driver of agricultural and crop input markets in the second quarter of 2013. U.S. spring planting was significantly later than average due to heavy precipitation early in the planting season. Once conditions dried sufficiently to allow planting, the spring application season was compressed and intense. While late planting tends to increase yield risk in corn because the crop pollinates later in the year (when temperatures are higher), U.S. crop conditions are near normal levels, which points to a significant improvement in yields versus 2012. Improved global crop production prospects have pushed crop prices lower. While analysts expect crop prices to be below levels of the past two years, they are expected to remain significantly above historical averages. The United States Department of Agriculture ("USDA") projects that global grains and oilseeds production will increase by 7 percent in 2013/14, but global grains and oilseeds ending stocks are projected to remain relatively tight, meaning that agricultural prices will need to remain high enough to maintain a strong global area base.
The late, wet spring has provided increased weed and disease pressure this year, particularly as the growing season has returned to a more normal pattern compared to last year, which is expected to be supportive of demand for crop protection products this summer.
Retail dealers sought to end the 2012/13 fertilizer year with minimal inventories, as a result of the uncertainty in global crop nutrient markets this year, which should support crop nutrient demand in advance of the fall 2013 application season. We also expect that due to potentially high corn yields, soil nutrient uptake will be higher this year and will reinforce grower demand for nutrients in the back half of 2013. Nitrogen prices declined in the second quarter of 2013 as the Northern Hemisphere's spring season ended and the market anticipated Chinese export supplies to enter the market in July. There remains uncertainty as to how much urea China will export in 2013, given exports in the first half of 2013 and the beginning of the export period were significantly higher than 2012. However, current market prices are less attractive to Chinese exporters. In response to reduced prices, some of the world's marginal nitrogen producers have shut down. In India, the monsoon season has been good so far, which should favor strong nitrogen demand.
The phosphate market has been impacted by the uncertainty over the timing and volume of Indian phosphate imports in particular. Indian phosphate imports are expected to decline in 2013/14, due to the changes in domestic subsidies and a further recent devaluation of the rupee. However, Indian buyers are still expected to purchase significant volumes due to the strong monsoon season and some benefit from lower Indian Maximum Retail Prices that are expected to pass onto growers. Other global buyers have purchased only as needed to meet sales; however, demand in South America has been relatively strong. In the first half of 2013, Brazilian DAP/MAP imports were up 52 percent from 2012 levels and Brazilian importers are traditionally most active in the second half of the year.
Global shipments of potash were strong in the second quarter and first half of 2013, supported by Chinese first half potash imports being the highest since 2007 and Brazilian imports on a record pace for 2013. In North America, strong potash shipments in the first three quarters of the 2012/13 fertilizer year, combined with the goal of minimal inventories by the end of the spring season, reduced second quarter demand compared to 2012. However, the recent announcement by Uralkali to exit the Belarusian Potash Company marketing agency and to significantly increase its operating rate in the future has added uncertainty to the outlook for potash markets. Time will be needed to evaluate how global producers and customers are likely to respond and what the implications are for the short and long-term outlook for the potash industry. Irrespective, U.S. domestic demand is expected to be solid in the fourth quarter, as nutrient removal for all three nutrients should be strong given the expected rebound in North American crop yields this year, and given that domestic retailers ended the spring season with minimal inventories. Globally, Brazil is expected to keep on a record pace for the year as they move into their busiest application period.
Forward-Looking Statements
Certain statements and other information included in this MD&A constitute "forward-looking information" within the meaning of applicable Canadian securities legislation or constitute "forward-looking statements" within the meaning of applicable U.S. securities legislation (collectively, the "forward-looking statements"). All statements in this MD&A, other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to, statements as to management's expectations with respect to: future crop and crop input volumes, demand, margins, prices and sales; business and financial prospects; and other plans, strategies, objectives and expectations, including with respect to future operations of Agrium and proposed acquisitions and divestitures and the growth and stability of our earnings. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements.
All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions listed below. Although Agrium believes that these assumptions are reasonable, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place an undue reliance on these assumptions and such forward-looking statements. The key assumptions that have been made in connection with the forward-looking statements include Agrium's ability to successfully integrate and realize the anticipated benefits of its already completed and future acquisitions, including the proposed acquisition of the Agri-products Business of Viterra.
Events or circumstances that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: general economic, market and business conditions, weather conditions including impacts from regional flooding and/or drought conditions; crop prices; the supply and demand and price levels for our major products; governmental and regulatory requirements and actions by governmental authorities, including changes in government policy, government ownership requirements, changes in environmental, tax and other laws or regulations and the interpretation thereof, and political risks, including civil unrest, actions by armed groups or conflict, as well as counterparty and sovereign risk; and other risk factors detailed from time to time in Agrium reports filed with the Canadian securities regulators and the Securities and Exchange Commission in the United States. There is a risk that the Egyptian Misr Fertilizer Production Company nitrogen facility in Egypt may not be allowed to proceed with the completion of the two new facilities. Additionally, there are risks associated with Agrium's acquisition of AWB, including litigation risk resulting from AWB having been named in litigation commenced by the Iraqi Government relating to the United Nations Oil-For-Food Programme. Furthermore, there are risks associated with Agrium's proposed acquisition of the Agri-products Business of Viterra including that completion of the acquisition of the assets proposed to be purchased by Agrium as well as the timing thereof is dependent on the receipt of the necessary regulatory approvals and the satisfaction of other conditions precedent to closing and there can be no assurances that such regulatory approvals will be received, and that the other conditions to closing will be satisfied, in a timely fashion, or at all; potential liabilities associated with the assets proposed to be assumed by Agrium, which may not be known to Agrium at this time, due in part, to the fact that the nature of the transaction did not allow for Agrium to complete customary due diligence prior to entering into the agreement to purchase the assets.
Agrium disclaims any intention or obligation to update or revise any forward-looking statements in this MD&A as a result of new information or future events, except as may be required under applicable U.S. federal securities laws or applicable Canadian securities legislation.
OTHER
Agrium Inc. is a major Retail supplier of agricultural products and services in North America, South America and Australia and a leading global Wholesale producer and marketer of all three major agricultural nutrients and the premier supplier of specialty fertilizers in North America through our Advanced Technologies business unit. Agrium's strategy is to provide the crop inputs and services needed to feed a growing world. We focus on maximizing shareholder returns by driving continuous improvements to our base businesses, pursuing value-added growth opportunities across the crop input value chain and returning capital to shareholders.
A WEBSITE SIMULCAST of the 2013 2nd Quarter Conference Call will be available in a listen-only mode beginning Thursday, August 8th, 2013 at 7:30 a.m. MT (9:30 a.m. ET). Please visit the following website: .
AGRIUM INC.
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED
June 30, 2013
AGRIUM INC.
Summarized Notes to the Consolidated Financial Statements
For the six months ended June 30, 2013
(Millions of U.S. dollars, except per share amounts)
(Unaudited)
1. Corporate Information
Corporate information
Agrium Inc. ("Agrium") is incorporated under the laws of Canada with common shares listed under the symbol "AGU" on the New York Stock Exchange (NYSE) and the Toronto Stock Exchange (TSX). Our Corporate head office is located at 13131 Lake Fraser Drive S.E. Calgary, Canada. We conduct operations globally from our Wholesale head office in Calgary, and our Retail and Advanced Technologies head offices in Loveland, Colorado, United States.
Agrium (with its subsidiaries) operates three strategic business units:
Basis of preparation and statement of compliance
These consolidated interim financial statements ("interim financial statements") were approved for issuance by the Audit Committee on August 7, 2013. We prepared these interim financial statements in accordance with International Financial Reporting Standards applicable to the preparation of interim financial statements as issued by the International Accounting Standards Board, including International Accounting Standard 34 Interim Financial Reporting. They do not include all information and disclosures normally provided in annual financial statements and should be read in conjunction with our audited annual financial statements and related notes contained in our 2012 Annual Report, available at .
Seasonality in our business results from increased demand for our products during planting seasons. Sales are generally higher in spring and fall.
2. Significant Accounting Policies
Except as described below, the accounting policies applied in this consolidated interim financial report are the same as those applied by Agrium in our 2012 Annual Report. The following changes in accounting policies will be reflected in our 2013 Annual Report.
3. Impact of Application of IFRS 11
Upon the application of IFRS 11, effective January 1, 2013 and with retrospective application to January 1, 2012, we reviewed and assessed the legal form and terms of contracts of our investments in joint arrangements. The application of IFRS 11 has changed the classification and subsequent accounting of our investment in Profertil S.A. and other joint arrangements, previously accounted for using the proportionate consolidation method. Under IFRS 11, Profertil S.A. and other joint arrangements are classified as joint ventures and our interest is accounted for using the equity method.
4. Business Acquisition
As described in our 2012 Annual Report, we have agreed to acquire certain agri-products assets of Viterra Inc. ("Viterra") from Glencore International plc ("Glencore") which acquired Viterra on December 17, 2012. Our purchase price, subject to adjustments, for the agri-products assets is Cdn$1.775-billion, including Viterra's 34 percent interest in a nitrogen facility located in Medicine Hat. On April 30, 2013, CF Industries Holdings Inc. ("CF"), holder of a 66 percent interest in the Medicine Hat facility, acquired Viterra's 34 percent interest from Glencore (the "CF transaction"). Following closing of the CF transaction, we received Cdn$939-million (U.S.$932-million), which is subject to adjustment for final determinations of amounts in accordance with our agreement with Glencore. Our acquisition of the agri-products assets from Viterra is subject to regulatory approval.
As partial funding for Glencore's acquisition of Viterra, we advanced the Cdn$1.775-billion (U.S.$1.801-billion) purchase price to Glencore on December 12, 2012. The advance, adjusted for foreign exchange translation and after deducting the amount received in the CF transaction and other adjustments, at June 30, 2013 is $762-million (December 31, 2012 - $1.792-billion). The advance is guaranteed by Glencore, secured by shares of Viterra, and does not bear interest. The advance is repayable by: i) the transfer of the agri-products assets to us or to third parties designated by us, in amounts allocated to the assets under our agreement with Glencore; and ii) cash payments for an adjustment to our purchase price of an amount equal to the after-tax operating cash flows from the business assets, and for working capital and other adjustments.
5.Other Expenses
6. Earnings per Share
7. Debt
During the three months ended June 30, 2013, we increased the total capacity available under our multi-jurisdictional facility from $1.6-billion to $2.5-billion and extended the term by one year to 2017.
On May 28, 2013, we issued $500-million of 3.5 percent debentures due June 1, 2023 and $500-million of 4.9 percent debentures due June 1, 2043.
Our base shelf prospectus permits up to an additional $1.0-billion of common shares, preferred shares, subscription receipts, debt securities or units until April 2014. Issuance of further securities under the base shelf prospectus requires filing a prospectus supplement and is subject to availability of funding in capital markets.
8. Financial Instruments
We determine fair value for financial instruments classified as Level 1 using independent quoted market prices for identical instruments in active markets. Fair value for financial instruments classified as Level 2 is estimated using quoted prices for similar instruments in active markets or prices for identical or similar instruments in markets that are not active, or using valuation techniques that are based on industry-accepted third-party models, which make maximum use of market-based inputs.
We determine the fair value of foreign exchange derivative contracts using the income approach. We determine the fair value of gas and power derivative contracts using the market approach. Inputs to fair value determinations include, but are not limited to, current spot prices and forward pricing curves for natural gas and power, current published interest rates and foreign currency exchange rates, market volatility, our own credit risk and counterparty credit risk.
We monitor the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or market liquidity generally drive changes in availability of observable market data. Changes in availability of observable market data, which also may result in changing the valuation technique used, are generally the cause of transfers between Level 1, Level 2 and Level 3. There have been no transfers between Level 1 and Level 2 fair value measurements in the reporting period ended June 30, 2013 (June 30, 2012 - no transfers). We do not measure any of our financial instruments using Level 3 inputs.
Fair value of long-term debt is determined based on comparable debt instruments. Carrying value of floating rate debt and all other financial instruments approximates fair value due to the short-term nature of the instruments.
9. Accumulated Other Comprehensive Income
10. Additional Information
Property, plant and equipment
During the six months ended June 30, 2013, we added $471-million to assets under construction at our Vanscoy Potash facility.
Share capital
During the six months ended June 30, 2013, we granted to officers and employees 395,759 Tandem Stock Appreciation Rights with a grant price of $101.13 and 193,398 Performance Share Units.
Our authorized share capital consists of unlimited common shares without par value and unlimited preferred shares.
Normal course issuer bid
During the three months ended June 30, 2013, we purchased one million shares for total consideration of $88-million under our normal course issuer bid ("NCIB"). From July 1, 2013 to July 31, 2013, we purchased one million shares for total consideration of $91-million. Under the NCIB, we may purchase for cancellation up to 5 percent of our currently issued and outstanding common shares until May 20, 2014. The actual number of shares purchased will be at Agrium's discretion and will depend on market conditions, share prices, Agrium's cash position and other factors.
11. Operating Segments
(1) Earnings (loss) before finance costs and income taxes.
(2) Certain measures presented in this table are not recognized measures under IFRS and our method of calculation may not be directly comparable to similar measures presented by other companies. We believe these supplemental non-IFRS measures provide useful information to management, investors and securities analysts in measuring our operating and financial performance and facilitating comparison from period to period as well as to peers and industry averages. Refer to Supplemental Information 6 for further explanations.
(3) Restated for the application of IFRS 11 Joint Arrangements requiring equity accounting for joint ventures.
(1) Earnings (loss) before finance costs and income taxes.
(2) Certain measures presented in this table are not recognized measures under IFRS and our method of calculation may not be directly comparable to similar measures presented by other companies. We believe these supplemental non-IFRS measures provide useful information to management, investors and securities analysts in measuring our operating and financial performance and facilitating comparison from period to period as well as to peers and industry averages. Refer to Supplemental Information 6 for further explanations.
(3) Restated for the application of IFRS 11 Joint Arrangements requiring equity accounting for joint ventures.
(1) Includes depreciation and amortization.
(2) International Retail sales were $911-million (2012 - $814-million) and gross profit was $132-million (2012 - $130-million) for the three months ended June 30. International Retail sales were $1,477-million (2012 - $1,399-million) and gross profit was $230-million (2012 - $239-million) for the six months ended June 30.
(3) Restated for the application of IFRS 11 Joint Arrangements requiring equity accounting for joint ventures.
(1) Restated for the application of IFRS 11 Joint Arrangements requiring equity accounting for joint ventures.
(1) Restated for the application of IFRS 11 Joint Arrangements requiring equity accounting for joint ventures.
(1) Restated for the application of IFRS 11 Joint Arrangements requiring equity accounting for joint ventures.
(1) Certain measures presented in this table are not recognized measures under IFRS and our method of calculation may not be directly comparable to similar measures presented by other companies. We believe these supplemental non-IFRS measures provide useful information to management, investors and securities analysts in measuring our operating and financial performance and facilitating comparison from period to period as well as to peers and industry averages. Refer to Supplemental Information 6 for further explanations.
(2) Restated for the application of IFRS 11 Joint Arrangements requiring equity accounting for joint ventures.
Contacts:
Agrium Inc.
Richard Downey
Vice President, Investor & Corporate Relations
(403) 225-7357
Agrium Inc.
Todd Coakwell
Director, Investor Relations
(403) 225-7437
Agrium Inc.
Louis Brown
Analyst, Investor Relations
(403) 225-7761
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Datum: 07.08.2013 - 18:46 Uhr
Sprache: Deutsch
News-ID 1252756
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